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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Crimson Ghost who wrote (37206)	1/11/2000 1:49:00 PM
From: clochard	Respond to of 99985

"Sell all bond rallies until stocks (and especially NASDAQ) go down for the count. Then buy like hell." Thats a dangerous strategy at best. Shorting the bond right now is likely to provoke a NASCRASH, causing a massive flight to the bond. Right now we are at a magic equilibrium, presumably headed for another stock selloff.

To: Crimson Ghost who wrote (37206)	1/11/2000 2:14:00 PM
From: pater tenebrarum	Read Replies (2) \| Respond to of 99985

George, a capitulation low in bonds may well be only an intermediate term low that produces a sharp short covering rally like the last one. or it may coincide with the beginning of a sell-off in equities, where the bullish consensus has climbed almost faster than the indices themselves lately. let's always keep in mind that a bond rally is NOT necessarily fuel for a rally in stocks. the two markets have de-coupled since July of '98 and there is no reason to expect this to change anytime soon. funny enough, it also suggests (along with the odd reaction of the stock market to the latest jobs report) that the underlying main fear in the stock market is still the fear of deflation, not inflation. probably quite logical in view of the explosion in U.S. private sector debt. the falling bond market btw. indirectly helps to fuel the stock market exuberance, as the Fed seems to be the only active buyer of bonds that's left. since the Fed's buying of bonds automatically means more credit gets pumped into the system, the sagging bond perversely contributes to rising stock prices which contribute to falling bond prices which...you get the point. :) hb